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Postponing Payments: Deferment and Forbearance

Events like losing a job, getting sick, and having financial trouble can be additional challenges to your education debt goals. In such situations, making on-time student loan payments may not seem like a priority.

Before missing any payments, though, know that under certain circumstances you can temporarily suspend your payments with deferment and forbearance.

Deferment: Things to Know

  • Different kinds of deferments have different criteria and different application forms.
  • Unemployment, extreme economic hardship, enrolling in school at least half time, or active military duty may qualify you.
  • Keep in mind that most deferments are only offered for a limited amount of time over the life of your loan, so use that time wisely.
  • During a deferment, the federal government generally pays any interest that accrues on your subsidized loans for a limited amount of time—but not on unsubsidized loans. Unsubsidized interest on deferred loans can increase the amount you owe overall.

Forbearance: Things to Know

  • If you don’t meet the criteria for a deferment, you may qualify for forbearance.
  • In most cases, forbearance is granted solely at the discretion of your lender or servicer and are only offered for limited amounts of time.
  • Forbearances are usually reserved for cases of financial hardship or illness.
  • Unlike a deferment, in forbearance both subsidized and unsubsidized portions of your loan continue to accrue interest.
  • At the end of the forbearance period, the interest is capitalized (added to the principal balance of the loan).
  • Forbearance can increases the amount you owe if you choose not to pay the interest that is accruing.
  • To apply for forbearance, contact your servicer directly.

Perkins Forbearance: Things to Know

Perkins loan forbearance is designed to help borrowers who are experiencing periods of financial hardship, illness, or other acceptable reasons. Interest would continue to accrue though payments would be postponed.

  • Forbearance is granted solely at the discretion of your lending school.
  • Though not required, the Department of Education encourages schools to grant forbearance for borrowers serving with Americorps.
  • Offered for up to one year at a time, but may not exceed a total of three years over the lifetime of the loan.
  • Hardship forbearance may be granted if the total amount you pay on your federal student loans is 20% or more of your gross monthly income.

Choosing the Right Option

Deferment and forbearance are both preferable to missing loan payments. But, because forbearance increases the amount you owe, try to first qualify for a deferment, especially if you have subsidized loans.

Also, before postponing repayment, see if it makes sense for you to lower your payments with a different repayment schedule. This can save you money and preserve your deferment and forbearance eligibility for situations when you really need it. There are limits to how much deferment and forbearance time you can use.

Loans given to you by your state or a private lender will have different deferment and forbearance options from federal loans. To learn about your specific options, contact the servicer of your state loans, your state’s office of education, or your private lender.

Note: Always continue making monthly loan payments until your lender or servicer notifies you that deferment or forbearance has been granted. If you don’t get formal notification quickly, contact your servicer or American Student Assistance® (ASA) to make sure your paperwork was received.

Kinds of Postponement

You can find detailed instructions and download the forms for each of these kinds of deferment at saltmoney.org:

Deferments for Pre-1993 Loans

If you began borrowing loans prior to 1993, the process for deferment is different, but deferments are available during:

  • Fellowships, medical internships or residency programs, and other educational, training, or rehabilitation programs
  • Parental leave and being a working mother of a preschooler
  • Public service in the military, for NOAA, the Public Health Service, Peace Corps, ACTION, or other specific other nonprofit volunteer programs
  • Periods of temporary disability or while you’re caring for a disabled spouse or dependent

To apply, you will need to provide documentation of your status to your student loan servicer (the company that sends you the bills) with certification from an authorized official. Contact them directly to find out exactly what documentation applies to your specific situation.